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IPSAS PRESENTATION OF FINANCIAL STATEMENTS

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									  IPSAS 1—PRESENTATION OF FINANCIAL STATEMENTS
                                Acknowledgment
This International Public Sector Accounting Standard is drawn primarily from
International Accounting Standard (IAS) 1, “Presentation of Financial Statements”
published by the International Accounting Standards Committee (IASC). The
International Accounting Standards Board (IASB) and the International Accounting
Standards Committee Foundation (IASCF) were established in 2001 to replace the
IASC. The International Accounting Standards (IASs) issued by the IASC remain in
force until they are amended or withdrawn by the IASB. Extracts from IAS 1 are
reproduced in this publication of the Public Sector Committee of the International
Federation of Accountants with the permission of IASB.
The approved text of the IASs is that published by IASB in the English language,
and copies may be obtained directly from IASB Publications Department, 7th floor,
166 Fleet Street, London EC4A 2DY, United Kingdom.
                          E-mail: publications@iasb.org
                           Internet: http://www.iasb.org
IASs, exposure drafts and other publications of IASC and IASB are copyright of the
IASCF.
“IAS,” “IASB,” “IASC,” “IASCF” and “International Accounting Standards” are
trademarks of IASCF and should not be used without the approval of IASCF.




IPSAS 1                                 22
                                 PRESENTATION OF FINANCIAL STATEMENTS




                                                                                                                                  PUBLIC SECTOR
                                                                                                           May 2000

   IPSAS 1—PRESENTATION OF FINANCIAL STATEMENTS
                                                     CONTENTS
                                                                                                                 Paragraph
Objective
Scope ...............................................................................................................    1–5
Definitions .......................................................................................................     6–12
       Economic Entity.......................................................................................            7–9
       Future Economic Benefits or Service Potential........................................                               10
       Government Business Enterprises............................................................                         11
       Net Assets/Equity.....................................................................................              12
Purpose of Financial Statements...................................................................... 13–16
Responsibility for Financial Statements .......................................................... 17–18
Components of Financial Statements .............................................................. 19–24
Overall Considerations .................................................................................... 25–63
       Fair Presentation and Compliance with International
       Public Sector Accounting Standards ........................................................ 25–36
       Accounting Policies.................................................................................. 37–42
       Going Concern ......................................................................................... 43–46
       Consistency of Presentation ..................................................................... 47–49
       Materiality and Aggregation .................................................................... 50–53
       Offsetting.................................................................................................. 54–59
       Comparative Information ......................................................................... 60–63
Structure and Content ...................................................................................... 64–133
      Introduction .............................................................................................. 64–74
      Identification of Financial Statements ..................................................... 66–70
      Reporting Period....................................................................................... 71–73
      Timeliness.................................................................................................          74
Statement of Financial Position ...................................................................... 75–100
      The Current/Non-Current Distinction....................................................... 75–78

                                                               23                                                       IPSAS 1
                              PRESENTATION OF FINANCIAL STATEMENTS




      Current Assets........................................................................................... 79–82
      Current Liabilities..................................................................................... 83–88
      Information to be Presented on the Face of the
      Statement of Financial Position................................................................ 89–94
      Information to be Presented Either on the Face of
      the Statement of Financial Position or in the Notes.................................. 95–100
Statement of Financial Performance ..............................................................101–113
      Information to be Presented on the Face of the
      Statement of Financial Performance.......................................................101–103
      Information to be Presented Either on the Face of
      the Statement of Financial Position or in the Notes................................104–113
Changes in Net Assets/Equity .......................................................................114–120
Cash Flow Statement .....................................................................................         121
Notes to the Financial Statements..................................................................122–133
      Structure .................................................................................................122–127
      Presentation of Accounting Policies.......................................................128–132
      Other Disclosures ...................................................................................       133
Transitional Provisions ..................................................................................134–135
Effective Date ................................................................................................136–137
Appendix 1 — Illustrative Financial Statement Structure
Appendix 2 — Qualitative Characteristics of Financial Reporting
Comparison with IAS 1




IPSAS 1                                                    24
                      PRESENTATION OF FINANCIAL STATEMENTS




                                                                                          PUBLIC SECTOR
The standards, which have been set in bold type, should be read in the context of the
commentary paragraphs in this Standard, which are in plain type, and in the context
of the “Preface to International Public Sector Accounting Standards.” International
Public Sector Accounting Standards are not intended to apply to immaterial items.
Objective
The objective of this Standard is to prescribe the manner in which general purpose
financial statements should be presented in order to ensure comparability both with
the entity’s own financial statements of previous periods and with the financial
statements of other entities. To achieve this objective, this Standard sets out overall
considerations for the presentation of financial statements, guidance for their
structure, and minimum requirements for the content of financial statements prepared
under the accrual basis of accounting. The recognition, measurement and disclosure
of specific transactions and other events are dealt with in other International Public
Sector Accounting Standards.

Scope
  1.     This Standard should be applied in the presentation of all general
         purpose financial statements prepared and presented under the accrual
         basis of accounting in accordance with International Public Sector
         Accounting Standards.

  2.     General purpose financial statements are those intended to meet the needs of
         users who are not in a position to demand reports tailored to meet their
         specific information needs. Users of general purpose financial statements
         include taxpayers and ratepayers, members of the legislature, creditors,
         suppliers, the media, and employees. General purpose financial statements
         include those that are presented separately or within another public
         document such as an annual report. This Standard does not apply to
         condensed interim financial information.

  3.     This Standard applies equally to the financial statements of an individual
         entity and to consolidated financial statements for an economic entity, such
         as whole-of-government financial statements.

  4.     This Standard applies to all public sector entities other than
         Government Business Enterprises.

  5.     Government Business Enterprises (GBEs) are required to comply with
         International Accounting Standards (IASs) issued by the International
         Accounting Standards Committee. The Public Sector Committee’s
         Guideline No. 1, “Financial Reporting by Government Business
         Enterprises” notes that IASs are relevant to all business enterprises,
         regardless of whether they are in the private or public sector. Accordingly,

                                          25                                   IPSAS 1
                      PRESENTATION OF FINANCIAL STATEMENTS


          Guideline No. 1 recommends that GBEs should present financial statements
          that conform, in all material respects, to IASs.
Definitions
  6.      The following terms are used in this Standard with the meanings
          specified:

          Accounting policies are the specific principles, bases, conventions, rules
          and practices adopted by an entity in preparing and presenting
          financial statements.

          Accrual basis means a basis of accounting under which transactions
          and other events are recognized when they occur (and not only when
          cash or its equivalent is received or paid). Therefore, the transactions
          and events are recorded in the accounting records and recognized in
          the financial statements of the periods to which they relate. The
          elements recognized under accrual accounting are assets, liabilities, net
          assets/equity, revenue and expenses.

          Assets are resources controlled by an entity as a result of past events
          and from which future economic benefits or service potential are
          expected to flow to the entity.

          Associate is an entity in which the investor has significant influence and
          which is neither a controlled entity nor a joint venture of the investor.

          Borrowing costs are interest and other expenses incurred by an entity
          in connection with the borrowing of funds.

          Cash comprises cash on hand and demand deposits.

          Cash equivalents are short-term, highly liquid investments that are
          readily convertible to known amounts of cash and which are subject to
          an insignificant risk of changes in value.

          Cash flows are inflows and outflows of cash and cash equivalents.

          Consolidated financial statements are the financial statements of an
          economic entity presented as those of a single entity.

          Contributions from owners means future economic benefits or service
          potential that has been contributed to the entity by parties external to
          the entity, other than those that result in liabilities of the entity, that
          establish a financial interest in the net assets/equity of the entity, which:


IPSAS 1                                   26
            PRESENTATION OF FINANCIAL STATEMENTS




                                                                              PUBLIC SECTOR
(a)    Conveys entitlement both to distributions of future economic
       benefits or service potential by the entity during its life, such
       distributions being at the discretion of the owners or their
       representatives, and to distributions of any excess of assets over
       liabilities in the event of the entity being wound up; and/or
(b)    Can be sold, exchanged, transferred or redeemed.

Control is the power to govern the financial and operating policies of
another entity so as to benefit from its activities.

Controlled entity is an entity that is under the control of another entity
(known as the controlling entity).

Controlling entity is an entity that has one or more controlled entities.

Distributions to owners means future economic benefits or service
potential distributed by the entity to all or some of its owners, either as
a return on investment or as a return of investment.

Economic entity means a group of entities comprising a controlling
entity and one or more controlled entities.

Equity method is a method of accounting whereby the investment is
initially recorded at cost and adjusted thereafter for the post-
acquisition change in the investor’s share of net assets/equity of the
investee. The statement of financial performance reflects the investor’s
share of the results of operations of the investee.

Expenses are decreases in economic benefits or service potential during
the reporting period in the form of outflows or consumption of assets or
incurrences of liabilities that result in decreases in net assets/equity,
other than those relating to distributions to owners.

Exchange difference is the difference resulting from reporting the same
number of units of a foreign currency in the reporting currency at
different exchange rates.

Extraordinary items are revenue or expenses that arise from events or
transactions that are clearly distinct from the ordinary activities of the
entity, are not expected to recur frequently or regularly and are outside
the control or influence of the entity.




                                27                                  IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


          Fair value is the amount for which an asset could be exchanged, or a
          liability settled, between knowledgeable, willing parties in an arm’s
          length transaction.
          A financial asset is any asset that is:
          (a)    Cash;
          (b)    A contractual right to receive cash or another financial asset
                 from another entity;
          (c)    A contractual right to exchange financial instruments with
                 another entity under conditions that are potentially favorable;
                 or
          (d)    An equity instrument of another entity.

          Foreign currency is a currency other than the reporting currency of an
          entity.

          Foreign operation is a controlled entity, associate, joint venture or
          branch of the reporting entity, the activities of which are based or
          conducted in a country other than the country of the reporting entity.

          Fundamental errors are errors discovered in the current period that
          are of such significance that the financial statements of one or more
          prior periods can no longer be considered to have been reliable at the
          date of their issue.

          Government Business Enterprise means an entity that has all the
          following characteristics:
          (a)    Is an entity with the power to contract in its own name;
          (b)    Has been assigned the financial and operational authority to
                 carry on a business;
          (c)    Sells goods and services, in the normal course of its business, to
                 other entities at a profit or full cost recovery;
          (d)    Is not reliant on continuing government funding to be a going
                 concern (other than purchases of outputs at arm’s length); and
          (e)    Is controlled by a public sector entity.

          Joint venture is a binding arrangement whereby two or more parties
          are committed to undertake an activity which is subject to joint control.




IPSAS 1                                    28
            PRESENTATION OF FINANCIAL STATEMENTS




                                                                               PUBLIC SECTOR
Liabilities are present obligations of the entity arising from past events,
the settlement of which is expected to result in an outflow from the
entity of resources embodying economic benefits or service potential.

Materiality: information is material if its omission or misstatement
could influence the decisions or assessments of users made on the basis
of the financial statements. Materiality depends on the nature or size of
the item or error judged in the particular circumstances of omission or
misstatement.

Minority interest is that part of the net surplus (deficit) and of net
assets/equity of a controlled entity attributable to interests which are
not owned, directly or indirectly through controlled entities, by the
controlling entity.

Net assets/equity is the residual interest in the assets of the entity after
deducting all its liabilities.
Net surplus/deficit comprises the following components:
(a)    Surplus or deficit from ordinary activities; and
(b)    Extraordinary items.

Ordinary activities are any activities which are undertaken by an entity
as part of its service delivery or trading activities. Ordinary activities
include such related activities in which the entity engages in
furtherance of, incidental to, or arising from these activities.

Qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale.

Reporting currency is the currency used in presenting the financial
statements.

Reporting date means the date of the last day of the reporting period to
which the financial statements relate.

Revenue is the gross inflow of economic benefits or service potential
during the reporting period when those inflows result in an increase in
net assets/equity, other than increases relating to contributions from
owners.

Surplus/deficit from ordinary activities is the residual amount that
remains after expenses arising from ordinary activities have been
deducted from revenue arising from ordinary activities.

                                29                                   IPSAS 1
                      PRESENTATION OF FINANCIAL STATEMENTS


Economic Entity
  7.  The term “economic entity” is used in this Standard to define, for financial
      reporting purposes, a group of entities comprising the controlling entity and
      any controlled entities.

  8.      Other terms sometimes used to refer to an economic entity include
          “administrative entity,” “financial entity,” “consolidated entity” and
          “group.”

  9.      An economic entity may include entities with both social policy and
          commercial objectives. For example, a government housing department
          may be an economic entity which includes entities that provide housing for
          a nominal charge, as well as entities that provide accommodation on a
          commercial basis.

Future Economic Benefits or Service Potential
 10.    Assets provide a means for entities to achieve their objectives. Assets that
        are used to deliver goods and services in accordance with an entity’s
        objectives but which do not directly generate net cash inflows are often
        described as embodying “service potential.” Assets that are used to generate
        net cash inflows are often described as embodying “future economic
        benefits.” To encompass all the purposes to which assets may be put, this
        Standard uses the term “future economic benefits or service potential” to
        describe the essential characteristic of assets.
Government Business Enterprises
 11.  Government Business Enterprises (GBEs) include both trading enterprises,
      such as utilities, and financial enterprises, such as financial institutions.
      GBEs are, in substance, no different from entities conducting similar
      activities in the private sector. GBEs generally operate to make a profit,
      although some may have limited community service obligations under
      which they are required to provide some individuals and organizations in
      the community with goods and services at either no charge or a significantly
      reduced charge. International Public Sector Accounting Standard (IPSAS) 6,
      “Consolidated Financial Statements and Accounting for Controlled Entities”
      provides guidance on determining whether control exists for financial
      reporting purposes, and should be referred to in determining whether a GBE
      is controlled by another public sector entity.
Net Assets/Equity
 12. “Net assets/equity” is the term used in this Standard to refer to the residual
        measure in the statement of financial position (assets less liabilities). Net
        assets/equity may be positive or negative. Other terms may be used in place
        of net assets/equity, provided that their meaning is clear.


IPSAS 1                                  30
                    PRESENTATION OF FINANCIAL STATEMENTS




                                                                                        PUBLIC SECTOR
Purpose of Financial Statements
 13.   Financial statements are a structured representation of the financial position
       of and the transactions undertaken by an entity. The objectives of general
       purpose financial statements are to provide information about the financial
       position, performance and cash flows of an entity that is useful to a wide
       range of users in making and evaluating decisions about the allocation of
       resources. Specifically, the objectives of general purpose financial reporting
       in the public sector should be to provide information useful for decision-
       making, and to demonstrate the accountability of the entity for the resources
       entrusted to it by:
       (a)    Providing information about the sources, allocation and uses of
              financial resources;
       (b)    Providing information about how the entity financed its activities
              and met its cash requirements;
       (c)    Providing information that is useful in evaluating the entity’s ability
              to finance its activities and to meet its liabilities and commitments;
       (d)    Providing information about the financial condition of the entity and
              changes in it; and
       (e)    Providing aggregate information useful in evaluating the entity’s
              performance in terms of service costs, efficiency and
              accomplishments.

 14.   General purpose financial statements can also have a predictive or
       prospective role, providing information useful in predicting the level of
       resources required for continued operations, the resources that may be
       generated by continued operations, and the associated risks and
       uncertainties. Financial reporting may also provide users with information:
       (a)    Indicating whether resources were obtained and used in accordance
              with the legally adopted budget; and
       (b)    Indicating whether resources were obtained and used in accordance
              with legal and contractual requirements, including financial limits
              established by appropriate legislative authorities.

 15.   To meet these objectives, the financial statements provide information
       about an entity’s:
       (a)    Assets;
       (b)    Liabilities;
       (c)    Net assets/equity;
       (d)    Revenue;
                                        31                                   IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


          (e)    Expenses; and
          (f)    Cash flows.

 16.      Whilst the information contained in financial statements can be relevant for
          the purpose of meeting the objectives in paragraph 13, it is unlikely to
          enable all these objectives to be met. This is likely to be particularly so in
          respect of entities whose primary objective may not be to make a profit, as
          managers are likely to be accountable for the achievement of service
          delivery as well as financial objectives. Supplementary information,
          including non-financial statements, may be reported alongside the financial
          statements in order to provide a more comprehensive picture of the entity’s
          activities during the period.
Responsibility for Financial Statements
 17.      The responsibility for the preparation and presentation of financial
          statements varies within and across jurisdictions. In addition, a jurisdiction
          may draw a distinction between who is responsible for preparing the
          financial statements and who is responsible for approving or presenting the
          financial statements. Examples of people or positions who may be
          responsible for the preparation of the financial statements of individual
          entities (such as government departments or their equivalent) include the
          individual who heads the entity (the permanent head or chief executive) and
          the head of the central finance agency (or the senior finance official, such as
          the controller or accountant-general).

 18.      The responsibility for the preparation of the consolidated financial
          statements of the government as a whole usually rests jointly with the head
          of the central finance agency (or the senior finance official, such as the
          controller or accountant-general) and the finance minister (or equivalent).
Components of Financial Statements
 19.      A complete set of financial statements includes the following
          components:
          (a)    Statement of financial position;
          (b)    Statement of financial performance;
          (c)    Statement of changes in net assets/equity;
          (d)    Cash flow statement; and
          (e)    Accounting policies and notes to the financial statements.

 20.      The components listed in paragraph 19 are referred to by a variety of names
          both within and across jurisdictions. The statement of financial position
          may also be referred to as a balance sheet or statement of assets and

IPSAS 1                                    32
                   PRESENTATION OF FINANCIAL STATEMENTS




                                                                                        PUBLIC SECTOR
      liabilities. The statement of financial performance may also be referred to as
      a statement of revenues and expenses, an income statement, an operating
      statement, or a profit and loss statement. The notes to the financial
      statements may include items referred to as “schedules” in some
      jurisdictions.

21.   The financial statements provide users with information about an entity’s
      resources and obligations at the reporting date and the flow of resources
      between reporting dates. This information is useful for users making
      assessments of an entity’s ability to continue to provide goods and services
      at a given level, and the level of resources that may need to be provided to
      the entity in the future so that it can continue to meet its service delivery
      obligations.

22.   Public sector entities are typically subject to budgetary limits in the form of
      appropriations or budget authorizations (or equivalent), which may be given
      effect through authorizing legislation. General purpose financial reporting
      by public sector entities may provide information on whether resources
      were obtained and used in accordance with the legally adopted budget.
      Where the financial statements and the budget are on the same basis of
      accounting, this Standard encourages the inclusion in the financial
      statements of a comparison with the budgeted amounts for the reporting
      period. Reporting against budgets may be presented in various different
      ways, including:
      (a)    The use of a columnar format for the financial statements, with
             separate columns for budgeted amounts and actual amounts. A
             column showing any variances from the budget or appropriation
             may also be presented, for completeness; and
      (b)    A statement by the individual(s) responsible for the preparation of
             the financial statements that the budgeted amounts have not been
             exceeded. If any budgeted amounts or appropriations have been
             exceeded, or expenses incurred without appropriation or other form
             of authority, then details may be disclosed by way of footnote to the
             relevant item in the financial statements.

23.   Entities are encouraged to present additional information to assist users in
      assessing the performance of the entity, and its stewardship of assets, as
      well as making and evaluating decisions about the allocation of resources.
      This additional information may include details about the entity’s outputs
      and outcomes in the form of performance indicators, statements of service
      performance, program reviews and other reports by management about the
      entity’s achievements over the reporting period.



                                       33                                    IPSAS 1
                      PRESENTATION OF FINANCIAL STATEMENTS


 24.      Entities are also encouraged to disclose information about compliance with
          legislative, regulatory or other externally-imposed regulations. When
          information about compliance is not included in the financial statements, it
          may be useful for a note to refer to any documents that include that
          information. Knowledge of non-compliance is likely to be relevant for
          accountability purposes and may affect a user’s assessment of the entity’s
          performance and direction of future operations. It may also influence
          decisions about resources to be allocated to the entity in the future.

Overall Considerations
Fair Presentation and Compliance with International Public Sector Accounting
Standards
 25.    Financial statements should present fairly the financial position,
        financial performance and cash flows of an entity. The appropriate
        application of International Public Sector Accounting Standards, with
        additional disclosures when necessary, results, in virtually all
        circumstances, in financial statements that achieve a fair presentation.

 26.      An entity whose financial statements comply with International Public
          Sector Accounting Standards should disclose that fact. Financial
          statements should not be described as complying with International
          Public Sector Accounting Standards unless they comply with all the
          requirements of each applicable International Public Sector
          Accounting Standard.

 27.      Inappropriate accounting treatments are not rectified either by
          disclosure of the accounting policies used, or by notes or explanatory
          material.
 28.      In the extremely rare circumstances when management concludes that
          compliance with a requirement in a Standard would be misleading,
          and therefore that departure from a requirement is necessary to
          achieve a fair presentation, an entity should disclose:
          (a)    That management has concluded that the financial statements
                 fairly present the entity’s financial position, financial
                 performance and cash flows;
          (b)    That it has complied in all material respects with applicable
                 International Public Sector Accounting Standards except that it
                 has departed from a Standard in order to achieve a fair
                 presentation;
          (c)    The Standard from which the entity has departed, the nature of
                 the departure, including the treatment that the Standard would


IPSAS 1                                   34
                   PRESENTATION OF FINANCIAL STATEMENTS




                                                                                        PUBLIC SECTOR
             require, the reason why that treatment would be misleading in
             the circumstances, and the treatment adopted; and
      (d)    The financial impact of the departure on the entity’s net surplus
             or deficit, assets, liabilities, net assets/equity, and cash flows for
             each period presented.

29.   Financial statements may be described as being “based on” or “complying
      with the significant requirements of,” or “in compliance with the accounting
      requirements of” International Public Sector Accounting Standards. There
      may be no further information, although it is clear that significant disclosure
      requirements, if not accounting requirements, are not met. Such statements
      are misleading because they detract from the reliability and
      understandability of the financial statements.

30.   In order to ensure that financial statements that claim compliance with
      International Public Sector Accounting Standards will meet the standards
      required by users internationally, this Standard includes an overall
      requirement that financial statements should give a fair presentation,
      guidance on how the fair presentation requirement is met, and further
      guidance for determining the extremely rare circumstances when a
      departure is necessary. It also requires prominent disclosure of the
      circumstances surrounding a departure. However, where an entity adopts
      International Public Sector Accounting Standards, the existence of
      conflicting national requirements (for example, where financial reporting
      requirements set by the government conflict with these Standards) is not, in
      itself, sufficient to justify a departure in financial statements that claim
      compliance with International Public Sector Accounting Standards.

31.   Departures from the requirements of an International Public Sector
      Accounting Standard in order to comply with statutory/legislative financial
      reporting requirements in a particular jurisdiction do not constitute
      departures necessary to achieve fair presentation as outlined in paragraph
      28. If such departures are material an entity cannot claim to be complying
      with International Public Sector Accounting Standards.

32.   In virtually all circumstances, a fair presentation is achieved by compliance
      in all material respects with applicable International Public Sector
      Accounting Standards. A fair presentation requires:
      (a)    Selecting and applying accounting policies in accordance with
             paragraph 37;
      (b)    Presenting information, including accounting policies, in a manner
             which provides relevant, reliable, comparable and understandable
             information; and

                                       35                                    IPSAS 1
                      PRESENTATION OF FINANCIAL STATEMENTS


          (c)    Providing additional disclosures when the requirements in
                 International Public Sector Accounting Standards are insufficient to
                 enable users to understand the impact of particular transactions or
                 events on the entity’s financial position and financial performance.

 33.      In extremely rare circumstances, application of a specific requirement in an
          International Public Sector Accounting Standard might result in misleading
          financial statements. This will be the case only when the treatment required
          by the Standard is clearly inappropriate and thus a fair presentation cannot
          be achieved either by applying the Standard or through additional disclosure
          alone. Departure is not appropriate simply because another treatment would
          also give a fair presentation.

 34.      When assessing whether a departure from a specific requirement in
          International Public Sector Accounting Standards is necessary,
          consideration is given to:
          (a)    The objective of the requirement and why that objective is not
                 achieved or is not relevant in the particular circumstances; and
          (b)    The way in which the entity’s circumstances differ from those of
                 other entities which follow the requirement.

 35.      Because the circumstances requiring a departure are expected to be
          extremely rare and the need for a departure will be a matter for considerable
          debate and subjective judgment, it is important that users are aware that the
          entity has not complied in all material respects with International Public
          Sector Accounting Standards. It is also important that they are given
          sufficient information to enable them to make an informed judgment on
          whether the departure is necessary and to calculate the adjustments that
          would be required to comply with the Standard.

 36.      When, in accordance with specific provisions in that Standard, an
          International Public Sector Accounting Standard is applied before its
          effective date, that fact should be disclosed.
Accounting Policies
 37.   Management should select and apply an entity’s accounting policies so
       that the financial statements comply with all the requirements of each
       applicable International Public Sector Accounting Standard. Where
       there is no specific requirement, management should develop policies to
       ensure that the financial statements provide information that is:
          (a)    Relevant to the decision-making needs of users; and
          (b)    Reliable in that they:


IPSAS 1                                   36
                     PRESENTATION OF FINANCIAL STATEMENTS




                                                                                   PUBLIC SECTOR
             (i)      Represent faithfully the financial performance and
                      financial position of the entity;
             (ii)     Reflect the economic substance of events and
                      transactions and not merely the legal form;
             (iii)    Are neutral, that is, free from bias;
             (iv)     Are prudent; and
             (v)      Are complete in all material respects.

38.   If one or more alternative accounting policies (benchmark or allowed
      alternative) are available under an International Public Sector
      Accounting Standard, an entity should choose and apply consistently
      one of those policies unless the Standard specifically requires or
      permits categorization of items (transactions, events, balances,
      amounts, etc.) for which policies are to be chosen. If a Standard
      requires or permits separate categorization of items, a single
      accounting policy should be selected and applied consistently to each
      category.

39.   Once an initial policy has been selected, a change in accounting policy
      should only be made in accordance with International Public Sector
      Accounting Standard (IPSAS) 3, “Net Surplus or Deficit for the Period,
      Fundamental Errors and Changes in Accounting Policies” and applied
      to all items or categories of items in the manner specified in
      paragraph 38.

40.   Accounting policies are the specific principles, bases, conventions, rules
      and practices adopted by an entity in preparing and presenting financial
      statements.

41.   The quality of information provided in financial statements determines the
      usefulness of the financial statements to users. Paragraph 37 requires the
      development of accounting policies to ensure that the financial statements
      provide information that meets a number of qualitative characteristics.
      Appendix 2 to this Standard summarizes the qualitative characteristics of
      financial reporting.

42.   In the absence of a specific International Public Sector Accounting
      Standard, management uses its judgment in developing an accounting
      policy that provides the most useful information to users of the entity’s
      financial statements. In making this judgment, management considers:
      (a)    The requirements and guidance in International Public Sector
             Accounting Standards dealing with similar and related issues;

                                        37                               IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


          (b)    The definitions, recognition and measurement criteria for assets,
                 liabilities, revenue and expenses described in other publications of
                 the International Federation of Accountants—Public Sector
                 Committee; and
          (c)    Pronouncements of other standard setting bodies and accepted
                 public or private sector practices to the extent, but only to the
                 extent, that these are consistent with (a) of this paragraph. For
                 example, pronouncements of the International Accounting
                 Standards Committee (IASC), including the “Framework for the
                 Preparation and Presentation of Financial Statements,” International
                 Accounting Standards and interpretations issued by the IASC’s
                 Standing Interpretations Committee.
Going Concern
 43.   When preparing financial statements an assessment of an entity’s
       ability to continue as a going concern should be made. This assessment
       should be made by those responsible for the preparation of the
       financial statements. Financial statements should be prepared on a
       going concern basis unless there is an intention to liquidate the entity or
       to cease operating, or if there is no realistic alternative but to do so.
       When those responsible for the preparation of the financial statements
       are aware, in making their assessment, of material uncertainties related
       to events or conditions which may cast significant doubt upon the
       entity’s ability to continue as a going concern, those uncertainties
       should be disclosed. When the financial statements are not prepared on
       a going concern basis, that fact should be disclosed, together with the
       basis on which the financial statements are prepared and the reason
       why the entity is not considered to be a going concern.

 44.      Financial statements are normally prepared on the assumption that the entity
          is a going concern and will continue in operation and meet its statutory
          obligations for the foreseeable future. In assessing whether the going
          concern assumption is appropriate, those responsible for the preparation of
          the financial statements take into account all available information for the
          foreseeable future, which should be at least, but is not limited to, twelve
          months from the approval of the financial statements.

 45.      The degree of consideration depends on the facts in each case, and
          assessments of the going concern assumption are not predicated on the
          solvency test usually applied to business enterprises. There may be
          circumstances where the usual going concern tests of liquidity and solvency
          appear unfavorable, but other factors suggest that the entity is nonetheless a
          going concern. For example:


IPSAS 1                                    38
                     PRESENTATION OF FINANCIAL STATEMENTS




                                                                                          PUBLIC SECTOR
        (a)    In assessing whether a government is a going concern, the power to
               levy rates or taxes may enable some entities to be considered as a
               going concern even though they may operate for extended periods
               with negative net assets/equity; and
        (b)    For an individual entity, an assessment of its statement of financial
               position at the reporting date may suggest that the going concern
               assumption is not appropriate. However, there may be multi-year
               funding agreements, or other arrangements, in place that will ensure
               the continued operation of the entity.

 46.    The determination of whether the going concern assumption is appropriate
        is primarily relevant for individual entities rather than for a government as a
        whole. For individual entities, in assessing whether the going concern basis
        is appropriate, those responsible for the preparation of the financial
        statements may need to consider a wide range of factors surrounding current
        and expected performance, potential and announced restructurings of
        organizational units, estimates of revenue or the likelihood of continued
        government funding, and potential sources of replacement financing before
        it is appropriate to conclude that the going concern assumption is
        appropriate.
Consistency of Presentation
 47.    The presentation and classification of items in the financial statements
        should be retained from one period to the next unless:
        (a)    A significant change in the nature of the operations of the entity
               or a review of its financial statement presentation demonstrates
               that the change will result in a more appropriate presentation of
               events or transactions; or
        (b)    A change in presentation is required by an International Public
               Sector Accounting Standard.

 48.    A significant acquisition or disposal, or a review of the financial statement
        presentation, might suggest that the financial statements should be
        presented differently. For example, an entity may dispose of a savings bank
        that represents one of its most significant controlled entities and the
        remaining economic entity conducts mainly administrative and policy
        advice services. In this case, the presentation of the financial statements
        based on the principal activities of the economic entity as a financial
        institution is unlikely to be relevant for the new economic entity.

 49.    Only if the revised structure is likely to continue, or if the benefit of an
        alternative presentation is clear, should an entity change the presentation of
        its financial statements. When such changes in presentation are made, an

                                         39                                    IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


          entity reclassifies its comparative information in accordance with paragraph
          62. Where an entity has adopted International Public Sector Accounting
          Standards, a change in presentation to comply with national requirements is
          permitted as long as the revised presentation is consistent with the
          requirements of this Standard.
Materiality and Aggregation
 50.    Items that are material by virtue of their nature should be presented
        separately in the financial statements. Items that are material by virtue
        of their size but which have the same nature may be aggregated.
        Immaterial amounts should be aggregated with amounts of a similar
        nature or function and need not be presented separately.

 51.      Financial statements result from processing large quantities of transactions
          that are structured by being aggregated into groups according to their nature
          or function. The final stage in the process of aggregation and classification
          is the presentation of condensed and classified data that form line items
          either on the face of the financial statements or in the notes. If a line item is
          not individually material, it is aggregated with other items either on the face
          of the financial statements or in the notes. An item that is not sufficiently
          material to warrant separate presentation on the face of the financial
          statements may nevertheless be sufficiently material that it should be
          presented separately in the notes.

 52.      In this context, information is material if its non-disclosure could influence
          the decision-making and evaluations of users about the allocation and
          stewardship of resources, and the performance of the entity, made on the
          basis of the financial statements. Materiality depends on the size and nature
          of the item judged in the particular circumstances of its omission. In
          deciding whether an item or an aggregate of items is material, the size and
          nature of the item are evaluated together. Depending on the circumstances,
          either the size or the nature of the item could be the determining factor. For
          example, individual revenues or receipts with the same nature and function
          are aggregated even if the individual amounts are large. However, large
          items which differ in nature or function are presented separately.

 53.      The principle of materiality provides that the specific disclosure
          requirements of International Public Sector Accounting Standards need not
          be met if the resulting information is not material.
Offsetting
 54.     Assets and liabilities should not be offset except when offsetting is
         required or permitted by another International Public Sector
         Accounting Standard.


IPSAS 1                                     40
                   PRESENTATION OF FINANCIAL STATEMENTS




                                                                                       PUBLIC SECTOR
55.   Items of revenue and expense should not be offset except when, and
      only when:
      (a)    An International Public Sector Accounting Standard requires
             or permits it; or
      (b)    Gains, losses and related expenses arising from the same or
             similar transactions and other events are not material. Such
             amounts should be aggregated in accordance with paragraph
             50.

56.   It is important that both assets and liabilities, and revenue and expenses,
      when material, are reported separately. Offsetting in either the statement of
      financial performance or the statement of financial position, except when
      offsetting reflects the substance of the transaction or event, detracts from
      the ability of users to understand the transactions undertaken and to assess
      the future cash flows of the entity. The reporting of assets net of valuation
      allowances, for example obsolescence allowances on inventories and
      doubtful debts allowances on receivables, is not offsetting.

57.   Revenue relating to exchange transactions is measured at the fair value of
      consideration received or receivable, taking into account the amount of any
      trade discounts and volume rebates allowed by the entity. An entity
      undertakes, in the course of its ordinary activities, other transactions which
      do not generate revenue but which are incidental to the main revenue
      generating activities. The results of such transactions are presented, when
      this presentation reflects the substance of the transaction or event, by
      netting any revenue with related expenses arising on the same transaction.
      For example:
      (a)    Gains and losses on the disposal of non-current assets, including
             investments and operating assets, are reported by deducting from
             the proceeds on disposal the carrying amount of the asset and
             related selling expenses;
      (b)    Expenses that are reimbursed under a contractual arrangement with
             a third party (for example, a sub-letting agreement) are netted
             against the related reimbursement; and
      (c)    Extraordinary items may be presented net of related taxation and
             minority interest, where appropriate, with the gross amounts shown
             in the notes.

58.   In addition, gains and losses arising from a group of similar transactions are
      reported on a net basis, for example foreign exchange gains and losses and
      gains and losses arising on financial instruments held for trading purposes.


                                       41                                    IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


          Such gains and losses are, however, reported separately if their size, nature
          or incidence is such that separate disclosure is required by IPSAS 3.
 59.      The offsetting of cash flows is dealt with in IPSAS 2, “Cash Flow
          Statements.”
Comparative Information
 60.  Unless an International Public Sector Accounting Standard permits or
      requires otherwise, comparative information should be disclosed in
      respect of the previous period for all numerical information in the
      financial statements, except in respect of the financial statements for
      the reporting period to which this Standard is first applied.
      Comparative information should be included in narrative and
      descriptive information when it is relevant to an understanding of the
      current period’s financial statements.
 61.      In some cases narrative information provided in the financial statements for
          the previous period(s) continues to be relevant in the current period. For
          example, details of a legal dispute, the outcome of which was uncertain at
          the last reporting date and is yet to be resolved, are disclosed in the current
          period. Users benefit from knowing that the uncertainty existed at the last
          reporting date, and the steps that have been taken during the period to
          resolve the uncertainty.

 62.      When the presentation or classification of items in the financial
          statements is amended, comparative amounts should be reclassified,
          unless it is impracticable to do so, to ensure comparability with the
          current period, and the nature, amount of, and reason for any
          reclassification should be disclosed. When it is impracticable to
          reclassify comparative amounts, an entity should disclose the reason
          for not reclassifying and the nature of the changes that would have
          been made if amounts were reclassified.

 63.      Circumstances may exist when it is impracticable to reclassify comparative
          information to achieve comparability with the current period. For example,
          data may not have been collected in the previous period(s) in a way which
          allows reclassification, and it may not be practicable to recreate the
          information. In such circumstances, the nature of the adjustments to
          comparative amounts that would have been made are disclosed. IPSAS 3
          contains guidance on the adjustments required to comparative information
          following a change in accounting policy that is applied retrospectively.




IPSAS 1                                    42
                      PRESENTATION OF FINANCIAL STATEMENTS




                                                                                          PUBLIC SECTOR
Structure and Content
Introduction
 64.    This Standard requires certain disclosures on the face of the financial
        statements, requires other line items to be disclosed either on the face of the
        financial statements or in the notes, and sets out recommended formats as
        an appendix to the Standard which an entity may follow as appropriate in
        its own circumstances.

 65.     This Standard uses the term disclosure in a broad sense, encompassing
         items presented on the face of each financial statement as well as in the
         notes to the financial statements. Disclosures required by other
         International Public Sector Accounting Standards are made in accordance
         with the requirements of those Standards. Unless this or another Standard
         specifies to the contrary, such disclosures are made either on the face of the
         relevant financial statement or in the notes.
Identification of Financial Statements
 66.     Financial statements should be clearly identified and distinguished
         from other information in the same published document.

 67.     International Public Sector Accounting Standards apply only to the
         financial statements, and not to other information presented in an annual
         report or other document. Therefore, it is important that users are able to
         distinguish information that is prepared using International Public Sector
         Accounting Standards from other information which may be useful to users
         but is not the subject of Standards.

 68.     Each component of the financial statements should be clearly
         identified. In addition, the following information should be
         prominently displayed, and repeated when it is necessary for a proper
         understanding of the information presented:
         (a)    The name of the reporting entity or other means of
                identification;
        (b)     Whether the financial statements cover the individual entity or
                the economic entity;
         (c)    The reporting date or the period covered by the financial
                statements, whichever is appropriate to the related component
                of the financial statements;
        (d)     The reporting currency; and
         (e)    The level of precision used in the presentation of figures in the
                financial statements.

                                          43                                    IPSAS 1
                      PRESENTATION OF FINANCIAL STATEMENTS


 69.      The requirements in paragraph 68 are normally met by presenting page
          headings and abbreviated column headings on each page of the financial
          statements. Judgment is required in determining the best way of presenting
          such information. For example, when the financial statements are read
          electronically, separate pages may not be used; the above items are then
          presented frequently enough to ensure a proper understanding of the
          information given.
 70.      Financial statements are often made more understandable by presenting
          information in thousands or millions of units of the reporting currency. This
          is acceptable as long as the level of precision in presentation is disclosed
          and relevant information is not lost.

Reporting Period
 71.    Financial statements should be presented at least annually. When, in
        exceptional circumstances, an entity’s reporting date changes and
        annual financial statements are presented for a period longer or
        shorter than one year, an entity should disclose, in addition to the
        period covered by the financial statements:
          (a)    The reason for a period other than one year being used; and
          (b)    The fact that comparative amounts for certain statements such
                 as the statement of financial performance, changes in net
                 assets/equity, cash flows and related notes are not comparable.

 72.      In exceptional circumstances an entity may be required to, or decide to,
          change its reporting date, for example in order to align the reporting cycle
          more closely with the budgeting cycle. When this is the case, it is important
          that users are aware that the amounts shown for the current period and
          comparative amounts are not comparable and that the reason for the change
          in reporting date is disclosed. A further example is where, in making the
          transition from cash to accrual accounting, an entity changes the reporting
          date for entities within the economic entity to enable the preparation of
          consolidated financial statements.

 73.      Normally, financial statements are consistently prepared covering a one
          year period. However, some entities prefer to report, for example, for a 52
          week period for practical reasons. This Standard does not preclude this
          practice, as the resulting financial statements are unlikely to be materially
          different to those that would be presented for one year.

Timeliness
 74.    The usefulness of financial statements is impaired if they are not made
        available to users within a reasonable period after the reporting date. An
        entity should be in a position to issue its financial statements within six

IPSAS 1                                    44
                     PRESENTATION OF FINANCIAL STATEMENTS




                                                                                          PUBLIC SECTOR
        months of the reporting date. Ongoing factors such as the complexity of an
        entity’s operations are not sufficient reason for failing to report on a timely
        basis. More specific deadlines are dealt with by legislation and regulations
        in many jurisdictions.
Statement of Financial Position
The Current/Non-current Distinction
 75.   Each entity should determine, based on the nature of its operations,
       whether or not to present current and non-current assets and current
       and non-current liabilities as separate classifications on the face of the
       statement of financial position. Paragraphs 79 to 88 of this Standard
       apply when this distinction is made. When an entity chooses not to
       make this classification, assets and liabilities should be presented
       broadly in order of their liquidity.

 76.    Whichever method of presentation is adopted, an entity should disclose
        for each asset and liability item that combines amounts expected to be
        recovered or settled both before and after twelve months from the
        reporting date, the amount expected to be recovered or settled after
        more than twelve months.

 77.    When an entity supplies goods or services within a clearly identifiable
        operating cycle, separate classification of current and non-current assets
        and liabilities on the face of the statement of financial position provides
        useful information by distinguishing the net assets that are continuously
        circulating as working capital from those used in the entity’s long-term
        operations. It also highlights assets that are expected to be realized within
        the current operating cycle, and liabilities that are due for settlement within
        the same period.

 78.    Information about the maturity dates of assets and liabilities is useful in
        assessing the liquidity and solvency of an entity. Guidance on the
        disclosure of the maturity dates of financial assets and financial liabilities
        can be found in International Accounting Standard (IAS) 32, “Financial
        Instruments: Disclosure and Presentation.” Financial assets include trade
        and other receivables and financial liabilities include trade and other
        payables. Information on the expected date of recovery and settlement of
        non-monetary assets and liabilities such as inventories and provisions is
        also useful whether or not assets and liabilities are classified between
        current and non-current.




                                         45                                     IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


Current Assets
 79.    An asset should be classified as a current asset when it:
          (a)    Is expected to be realized in, or is held for sale or consumption
                 in, the normal course of the entity’s operating cycle; or
          (b)    Is held primarily for trading purposes or for the short-term and
                 expected to be realized within twelve months of the reporting
                 date; or
          (c)    Is cash or a cash equivalent asset.
          All other assets should be classified as non-current assets.

 80.      This Standard uses the term “non-current assets” to include intangible,
          operating and financial assets of a long-term nature. It does not prohibit the
          use of alternative descriptions as long as their meaning is clear.

 81.      The operating cycle of an entity is the time taken to convert inputs or
          resources into outputs. For instance, governments transfer resources to
          public sector entities so that they can convert those resources into goods
          and services, or outputs, to meet the government’s desired social, political
          and economic outcomes.

 82.      Current assets include taxes receivable, user charges receivable, fines and
          regulatory fees receivable, inventories and accrued investment revenue that
          are either realized, consumed or sold, as part of the normal operating cycle
          even when they are not expected to be realized within twelve months of the
          reporting date. Marketable securities are classified as current assets if they
          are expected to be realized within twelve months of the reporting date;
          otherwise they are classified as non-current assets.
Current Liabilities
 83.   A liability should be classified as a current liability when it:
          (a)    Is expected to be settled in the normal course of the entity’s
                 operating cycle; or
          (b)    Is due to be settled within twelve months of the reporting date.
          All other liabilities should be classified as non-current liabilities.

 84.      Current liabilities can be categorized in a similar way to current assets.
          Some current liabilities, such as government transfers payable and accruals
          for employee and other operating costs, form part of the working capital
          used in the normal operating cycle of the entity. Such operating items are
          classified as current liabilities even if they are due to be settled after more
          than twelve months from the reporting date.

IPSAS 1                                    46
                   PRESENTATION OF FINANCIAL STATEMENTS




                                                                                          PUBLIC SECTOR
85.   Other current liabilities are not settled as part of the current operating cycle,
      but are due for settlement within twelve months of the reporting date.
      Examples are the current portion of interest-bearing liabilities, bank
      overdrafts, dividends payable, income taxes and other non-trade payables.
      Interest-bearing liabilities that provide the financing for working capital on
      a long-term basis, and are not due for settlement within twelve months, are
      non-current liabilities.

86.   An entity should continue to classify its long-term interest-bearing
      liabilities as non-current, even when they are due to be settled within
      twelve months of the reporting date if:
      (a)    The original term was for a period of more than twelve months;
      (b)    The entity intends to refinance the obligation on a long-term
             basis; and
      (c)    That intention is supported by an agreement to refinance, or to
             reschedule payments, which is completed before the financial
             statements are approved.

      The amount of any liability that has been excluded from current
      liabilities in accordance with this paragraph, together with information
      in support of this presentation, should be disclosed in the notes to the
      statement of financial position.

87.   Some obligations that are due to be repaid within the next operating cycle
      may be expected to be refinanced or “rolled-over” at the discretion of the
      entity and, therefore, are not expected to use current working capital of the
      entity. Such obligations are considered to form part of the entity’s long-
      term financing and should be classified as non-current. However, in
      situations in which refinancing is not at the discretion of the entity (as
      would be the case if there were no agreement to refinance), the refinancing
      cannot be considered automatic and the obligation is classified as current
      unless the completion of a refinancing agreement before approval of the
      financial statements provides evidence that the substance of the liability at
      the reporting date was long term.

88.   Some borrowing agreements incorporate undertakings (covenants) by the
      borrower which have the effect that the liability becomes payable on
      demand if certain conditions related to the borrower’s financial position are
      breached. In these circumstances, if the conditions have been breached, the
      liability is classified as non-current only when:
      (a)    The lender has agreed, prior to the approval of the financial
             statements, not to demand payment as a consequence of the breach;
             and
                                        47                                     IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


          (b)    It is not probable that further breaches will occur within twelve
                 months of the reporting date.
Information to be Presented on the Face of the Statement of Financial Position
 89.   As a minimum, the face of the statement of financial position should
       include line items which present the following amounts:
          (a)    Property, plant and equipment;
          (b)    Intangible assets;
          (c)    Financial assets [excluding amounts shown under (d), (f) and
                 (h)];
          (d)    Investments accounted for using the equity method;
          (e)    Inventories;
          (f)    Recoverables from non-exchange transactions, including taxes
                 and transfers;
          (g)    Receivables from exchange transactions;
          (h)    Cash and cash equivalents;
           (i)   Taxes and transfers payable;
           (j)   Payables under exchange transactions;
          (k)    Provisions;
           (l)   Non-current liabilities;
          (m)    Minority interest; and
          (n)    Net assets/equity.

 90.      Additional line items, headings and sub-totals should be presented on
          the face of the statement of financial position when an International
          Public Sector Accounting Standard requires it, or when such
          presentation is necessary to present fairly the entity’s financial
          position.

 91.      This Standard does not prescribe the order or format in which items are to
          be presented. Paragraph 89 simply provides a list of items that are so
          different in nature or function that they deserve separate presentation on the
          face of the statement of financial position. Illustrative formats are set out in
          Appendix 1 to this Standard. Adjustments to the line items above include
          the following:
          (a)    Line items are added when another International Public Sector
                 Accounting Standard requires separate presentation on the face of

IPSAS 1                                     48
                     PRESENTATION OF FINANCIAL STATEMENTS




                                                                                          PUBLIC SECTOR
               the statement of financial position, or when the size, nature or
               function of an item is such that separate presentation would assist in
               presenting fairly the entity’s financial position; and
        (b)    The descriptions used and the ordering of items may be amended
               according to the nature of the entity and its transactions, to provide
               information that is necessary for an overall understanding of the
               entity’s financial position.

 92.    The line items listed in paragraph 89 are broad in nature and need not be
        limited to items falling within the scope of other Standards. For example,
        the line item intangible assets includes goodwill and assets arising from
        development costs.

 93.    The judgment on whether additional items are separately presented is based
        on an assessment of:
        (a)    The nature and liquidity of assets and their materiality, leading, in
               most cases, to the separate presentation of goodwill and assets
               arising from development costs, monetary and non-monetary assets
               and current and non-current assets;
        (b)    Their function within the entity, leading, for example, to the separate
               presentation of operating and financial assets, inventories,
               receivables and cash and cash equivalent assets; and
        (c)    The amounts, nature and timing of liabilities, leading, for example,
               to the separate presentation of interest-bearing and non-interest-
               bearing liabilities and provisions, classified as current or non-current
               as appropriate.

 94.    Assets and liabilities that differ in nature or function are sometimes subject
        to different measurement bases. For example certain classes of property,
        plant and equipment may be carried at cost, or at revalued amounts. The
        use of different measurement bases for different classes of assets suggests
        that their nature or function differs and therefore that they should be
        presented as separate line items.
Information to be Presented either on the Face of the Statement of Financial
Position or in the Notes
 95.     An entity should disclose, either on the face of the statement of
         financial position or in the notes to the statement of financial position,
         further sub-classifications of the line items presented, classified in a
         manner appropriate to the entity’s operations. Each item should be
         sub-classified, when appropriate, by its nature, and amounts payable to
         and receivable from the controlling entity, fellow controlled entities
         and associates and other related parties should be disclosed separately.

                                         49                                     IPSAS 1
                         PRESENTATION OF FINANCIAL STATEMENTS


 96.      The detail provided in sub-classifications, either on the face of the
          statement of financial position or in the notes depends on the requirements
          of International Public Sector Accounting Standards and the size, nature
          and function of the amounts involved. The factors set out in paragraph 93
          are also used to decide the basis of sub-classification. The disclosures will
          vary for each item, for example:
          (a)    Tangible assets should be classified by class in accordance with any
                 appropriate standards that address accounting for property, plant and
                 equipment;
          (b)    Receivables are analyzed between amounts receivable from user
                 charges, taxes and other non-reciprocal revenues, other members of
                 the economic entity, receivables from related parties, prepayments,
                 and other amounts;
          (c)    Inventories are sub-classified in accordance with appropriate
                 standards that address accounting for inventories, into classifications
                 such as merchandise, production supplies, materials, work in
                 progress and finished goods;
          (d)    Taxes and transfers payable are analyzed between tax refunds
                 payable, transfers payable, and amounts payable to other members
                 of the economic entity;
          (e)    Provisions are analyzed showing separately provisions for employee
                 benefit costs and any other items classified in a manner appropriate
                 to the entity’s operations; and
          (f)    Components of net assets/equity are analyzed showing separately
                 contributed capital, accumulated surpluses and deficits and any
                 reserves.

 97.      When an entity has no share capital, it should separately disclose the
          following, either on the face of the statement of financial position or in
          the notes:
          (a)    Net assets/equity, showing separately:
                 (i)      Contributed capital, being the cumulative total at the
                          reporting date of contributions from owners, less
                          distributions to owners;
                 (ii)     Accumulated surpluses or deficits;
                 (iii)    Reserves, including a description of the nature and
                          purpose of each reserve within net assets/equity; and
                 (iv)     Minority interests; and


IPSAS 1                                    50
                      PRESENTATION OF FINANCIAL STATEMENTS




                                                                                        PUBLIC SECTOR
       (b)    The amount of a distribution (other than the return of capital)
              proposed or declared after the reporting date but before the
              financial statements were authorized for issue.

 98.   Many public sector entities will not have share capital but the entity will be
       controlled exclusively by another public sector entity. The nature of the
       government’s interest in the net assets/equity of the entity is likely to be a
       combination of contributed capital and the aggregate of the entity’s
       accumulated surpluses or deficits and reserves—which reflect the net
       assets/equity attributable to the entity’s operations.

 99.   In some cases, there may be a minority interest in the net assets/equity of
       the entity. For example, at whole-of-government level, the economic entity
       may include a Government Business Enterprise that has been partly
       privatized. Accordingly, there may be private shareholders who have a
       financial interest in the net assets/equity of the entity.

100.   When an entity has share capital, in addition to the disclosures in
       paragraph 97, it should disclose the following, either on the face of the
       statement of financial position or in the notes:
       (a)    For each class of share capital:
              (i)      The number of shares authorized;
              (ii)     The number of shares issued and fully paid, and issued
                       but not fully paid;
              (iii)    Par value per share, or that the shares have no par value;
              (iv)     A reconciliation of the number of shares outstanding at
                       the beginning and at the end of the year;
              (v)      The rights, preferences and restrictions attaching to that
                       class, including restrictions on the distribution of
                       dividends and the repayment of capital;
              (vi)     Shares in the entity held by the entity itself or by
                       controlled entities or associates of the entity; and
              (vii)    Shares reserved for issuance under options and sales
                       contracts, including the terms and amounts;
       (b)    A description of the nature and purpose of each reserve within
              net assets/equity;
       (c)    The amount of dividends that were proposed or declared after
              the reporting date but before the financial statements were
              authorized for issue; and


                                        51                                    IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


          (d)    The amount of any cumulative preference dividends not
                 recognized.
Statement of Financial Performance
Information to be Presented on the Face of the Statement of Financial
Performance
101.   As a minimum, the face of the statement of financial performance
       should include line items which present the following amounts:
          (a)    Revenue from operating activities;
          (b)    Surplus or deficit from operating activities;
          (c)    Finance costs;
          (d)    Share of net surpluses or deficits of associates and joint ventures
                 accounted for using the equity method;
          (e)    Surplus or deficit from ordinary activities;
          (f)    Extraordinary items;
          (g)    Minority interest share of net surplus or deficit; and
          (h)    Net surplus or deficit for the period.

          Additional line items, headings and sub-totals should be presented on
          the face of the statement of financial performance when required by an
          International Public Sector Accounting Standard, or when such
          presentation is necessary to present fairly the entity’s financial
          performance.

102.      In the context of the statement of financial performance, operating activities
          refers to those activities which an entity carries out in order to achieve its
          primary objectives. Revenues and expenses arising from operating
          activities are distinguished from those arising from holding assets or
          financing an entity’s operations. For example, a local government’s
          operations may include the generation of revenue from property taxes and
          the incurrence of expenses such as wages, depreciation and consumables.
          Other items such as finance costs and gains and losses on the sale of
          property, plant and equipment are generally incidental to the local
          government’s primary objectives and therefore outside its operating
          activities.

103.      The effects of an entity’s various activities, transactions and other events
          differ in terms of their impact on its ability to meet its service delivery
          obligations, and the disclosure of the elements of performance assists in an
          understanding of the performance achieved and in predicting future results.

IPSAS 1                                    52
                    PRESENTATION OF FINANCIAL STATEMENTS




                                                                                        PUBLIC SECTOR
        Additional line items are included on the face of the statement of financial
        performance and the descriptions used and the ordering of items are
        amended when this is necessary to explain the elements of performance.
        Factors to be taken into consideration include materiality and the nature
        and function of the various components of revenue and expenses. Revenue
        and expense items are offset only when the criteria in paragraph 55 are
        met.
Information to be Presented either on the Face of the Statement of Financial
Performance or in the Notes
104.   An entity should present, either on the face of the statement of
       financial performance or in the notes to the statement of financial
       performance, a sub-classification of total revenue, classified in a
       manner appropriate to the entity’s operations.

105.    An entity should present, either on the face of the statement of
        financial performance or in the notes to the statement of financial
        performance, an analysis of expenses using a classification based on
        either the nature of expenses or their function within the entity, as
        appropriate.

106.    Entities are encouraged to present the analysis in paragraph 105 on the face
        of the statement of financial performance.

107.    Expense items are further sub-classified in order to highlight the costs and
        cost recoveries of particular programs, activities or other relevant segments
        of the reporting entity. This information may be provided in one of two
        ways.

108.    The first analysis is referred to as the nature of expense method. Expenses
        are aggregated in the statement of financial performance according to their
        nature, (for example depreciation, purchases of materials, transport costs,
        wages and salaries), and are not reallocated amongst various functions
        within the entity. This method is simple to apply in many smaller entities
        because no allocations of operating expenses between functional
        classifications are necessary. An example of a classification using the

        Revenue from operating activities                                      X
        Salaries and employee benefits                           X
        Depreciation and amortization expense                    X
        Other operating expenses                                 X
        Total expenses                                                         (X)
        Surplus from operating activities                                       X
        nature of expense method is as follows:

                                         53                                   IPSAS 1
                      PRESENTATION OF FINANCIAL STATEMENTS


109.      The second analysis, referred to as the functional method of expense
          classification, classifies expenses according to the program or purpose for
          which they were made. This presentation often provides more relevant
          information to users than the classification of expenses by nature, although
          the allocation of expenses to functions can be arbitrary and involves
          considerable judgment. An example of the functional method of expense
          classification is as follows:

          Total revenue                                                        X
          Expenses:
          Health expenses                                                     (X)
          Education expenses                                                  (X)
          Other expenses                                                      (X)
          Surplus/(deficit)                                                    X


110.      The expenses associated with the main functions undertaken by the entity
          are shown separately. In this example, the entity has functions relating to
          the provision of health and education services. The entity would present
          expense line items for each of these functions.

111.      Entities classifying expenses by function should disclose additional
          information on the nature of expenses, including depreciation and
          amortization expense, salaries and employee benefits, and finance
          costs.
112.      The choice of analysis between the functional method and the nature of
          expense method depends on both the historical and regulatory factors and
          the nature of the organization. Both methods provide an indication of the
          costs which might be expected to vary, directly and indirectly, with the
          outputs of the entity. Because each method of presentation has its merits for
          different types of entities, this Standard provides a choice between
          classifications based on what fairly presents the elements of an entity’s
          performance.

113.      When an entity provides a dividend to its owners and has share capital,
          it should disclose, either on the face of the statement of financial
          performance or in the notes, the amount of dividends per share,
          declared or proposed, for the period covered by the financial
          statements.
Changes in Net Assets/Equity
114.      An entity should present, as a separate component of its financial
          statements, a statement showing:


IPSAS 1                                    54
                    PRESENTATION OF FINANCIAL STATEMENTS




                                                                                           PUBLIC SECTOR
       (a)    The net surplus or deficit for the period;
       (b)    Each item of revenue and expense, which, as required by other
              standards, is recognized directly in net assets/equity, and the
              total of these items; and
       (c)    The cumulative effect of changes in accounting policy and the
              correction of fundamental errors dealt with under the
              benchmark treatments in IPSAS 3.
115.   In addition, an entity should present, either within this statement or in
       the notes:
       (a)    Contributions by owners and distributions to owners, in their
              capacity as owners;
       (b)    The balance of accumulated surpluses or deficits at the
              beginning of the period and at the reporting date, and the
              movements for the period; and
       (c)    To the extent that components of net assets/equity are separately
              disclosed, a reconciliation between the carrying amount of each
              component of net assets/equity at the beginning and the end of
              the period, separately disclosing each movement.

116.   Changes in an entity’s net assets/equity between two reporting dates reflect
       the increase or decrease in its wealth during the period, under the particular
       measurement principles adopted and disclosed in the financial statements.

117.   The overall change in net assets/equity represents the total net
       surplus/deficit for the period, other revenues and expenses recognized
       directly as changes in net assets/equity, together with any contributions by,
       and distributions to, owners in their capacity as owners.

118.   Contributions by, and distributions to, owners include transfers between
       two entities within an economic entity (for example, a transfer from a
       government, acting in its capacity as owner, to a government department).
       Contributions by owners, in their capacity as owners, to controlled entities
       are recognized as a direct adjustment to net assets/equity only where they
       explicitly give rise to residual interests in the entity in the form of rights to
       net assets/equity.

119.   IPSAS 3 requires all items of revenue and expense recognized in a period
       to be included in the determination of net surplus or deficit for the period
       unless an International Public Sector Accounting Standard requires or
       permits otherwise. Other Standards require certain items, such as
       revaluation surpluses and deficits and certain foreign exchange differences,
       to be recognized directly as changes in net assets/equity along with capital
                                         55                                     IPSAS 1
                       PRESENTATION OF FINANCIAL STATEMENTS


          transactions with and distributions to the entity’s owners. Since in assessing
          the changes in an entity’s financial position between two reporting dates it
          is important to take into consideration all items which contribute to the
          change in position, this Standard requires a separate component of the
          financial statements which highlights both an entity’s net surplus/deficit for
          the period and those items that have been recognized directly in net
          assets/equity during the period.

120.      The requirements in paragraphs 114 and 115 may be met by using a
          columnar format which reconciles the opening and closing balances of each
          element within net assets/equity, including all items listed in paragraphs
          114 and 115. Paragraph 114 also requires a sub-total of all items of revenue
          and expense, which, as required by other Standards, have been recognized
          directly in net assets/equity.

Cash Flow Statement
121.      IPSAS 2 sets out requirements for the presentation of the cash flow
          statement and related disclosures. It states that cash flow information is
          useful in providing users of financial statements with a basis to assess the
          ability of the entity to generate cash and cash equivalents, and the needs of
          the entity to utilize those cash flows.
Notes to the Financial Statements
Structure
122.    The notes to the financial statements of an entity should:
          (a)    Present information about the basis of preparation of the
                 financial statements and the specific accounting policies selected
                 and applied for significant transactions and other events;
          (b)    Disclose the information required by international public sector
                 accounting standards that is not presented elsewhere in the
                 financial statements; and
          (c)    Provide additional information which is not presented on the
                 face of the financial statements but that is necessary for a fair
                 presentation.

123.      Notes to the financial statements should be presented in a systematic
          manner. Each item on the face of the statement of financial
          performance, statement of financial position and cash flow statement
          should be cross-referenced to any related information in the notes.

124.      Notes to the financial statements include narrative descriptions or more
          detailed schedules or analyses of amounts shown on the face of the

IPSAS 1                                    56
                      PRESENTATION OF FINANCIAL STATEMENTS




                                                                                      PUBLIC SECTOR
        statement of financial performance, statement of financial position, cash
        flow statement and statement of changes in net assets/equity, as well as
        additional information such as contingent liabilities and commitments.
        They include information required and encouraged to be disclosed by
        International Public Sector Accounting Standards, and other disclosures
        necessary to achieve a fair presentation.

125.    Notes are normally presented in the following order, which assists users in
        understanding the financial statements and comparing them with those of
        other entities:
        (a)    Statement of compliance with International          Public   Sector
               Accounting Standards (see paragraph 26);
        (b)    Statement of the measurement basis (bases) and accounting policies
               applied;
        (c)    Supporting information for items presented on the face of each
               financial statement in the order in which each line item and each
               financial statement is presented; and
        (d)    Other disclosures, including:
               (i)     Contingencies, commitments and other financial disclosures;
                       and
               (ii)    Non-financial disclosures.

126.    In some circumstances, it may be necessary or desirable to vary the
        ordering of specific items within the notes. For example, information on
        interest rates and fair value adjustments may be combined with information
        on maturities of financial instruments although the former are statement of
        financial performance disclosures and the latter relate to the statement of
        financial position. Nevertheless, a systematic structure for the notes is
        retained as far as practicable.

127.    Information about the basis of preparation of the financial statements and
        specific accounting policies may be presented as a separate component of
        the financial statements.
Presentation of Accounting Policies
128.    The accounting policies section of the notes to the financial statements
        should describe the following:
        (a)    The measurement basis (or bases) used in preparing the
               financial statements;




                                         57                                 IPSAS 1
                        PRESENTATION OF FINANCIAL STATEMENTS


          (b)    The extent to which the entity has applied any transitional
                 provisions in any international public sector accounting
                 standard; and
          (c)    Each specific accounting policy that is necessary for a proper
                 understanding of the financial statements.

129.      In addition to the specific accounting policies used in the financial
          statements, it is important for users to be aware of the measurement basis
          (bases) used (historical cost, current cost, realizable value, fair value or
          present value) because they form the basis on which the whole of the
          financial statements are prepared. When more than one measurement basis
          is used in the financial statements, for example when certain items are
          revalued, it is sufficient to provide an indication of the categories of assets
          and liabilities to which each measurement basis is applied.

130.      In deciding whether a specific accounting policy should be disclosed,
          management considers whether disclosure would assist users in
          understanding the way in which transactions and events are reflected in the
          reported performance and financial position. The accounting policies that
          an entity might consider presenting include, but are not restricted to, the
          following:
          (a)    Revenue recognition
          (b)    Consolidation principles, including controlled entities
          (c)    Investments
          (d)    Recognition and        depreciation/amortization    of    tangible   and
                 intangible assets
          (e)    Capitalization of borrowing costs and other expenditure:
                 (i)      Inventories held for sale
                 (ii)     Other qualifying assets
          (f)    Construction contracts
          (g)    Investment properties
          (h)    Financial instruments and investments
          (i)    Leases
          (j)    Research and development costs
          (k)    Inventories:
                 (i)      Held for resale
                 (ii)     For consumption
IPSAS 1                                     58
                    PRESENTATION OF FINANCIAL STATEMENTS




                                                                                        PUBLIC SECTOR
        (l)    Provisions
       (m)     Employee benefit costs
       (n)     Foreign currency translation and hedging
       (o)     Definition of segments and the basis for allocation of costs between
               segments
       (p)     Inflation accounting
       (q)     Government grants

131.    Each entity considers the nature of its operations and the policies which the
        user would expect to be disclosed for that type of entity. For example,
        public sector entities would be expected to disclose an accounting policy
        for recognition of taxes, donations and other forms of non-reciprocal
        revenue. When an entity has significant foreign operations or transactions
        in foreign currencies, disclosure of accounting policies for the recognition
        of foreign exchange gains and losses and the hedging of such gains and
        losses would be expected. In consolidated financial statements, the policy
        used for determining goodwill and minority interest is disclosed.

132.    An accounting policy may be significant even if amounts shown for current
        and prior periods are not material. It is also appropriate to disclose an
        accounting policy for each policy not covered by existing International
        Public Sector Accounting Standards, but selected and applied in accordance
        with paragraph 37.
Other Disclosures
133.   An entity should disclose the following if not disclosed elsewhere in
       information published with the financial statements:
       (a)     The domicile and legal form of the entity, and the jurisdiction
               within which it operates;
       (b)     A description of the nature of the entity’s operations and
               principal activities;
       (c)     A reference to the relevant legislation governing the entity’s
               operations; and
       (d)     The name of the controlling entity and the ultimate controlling
               entity of the economic entity (where applicable).
Transitional Provisions
134.    All provisions of this Standard should be applied from the date of first
        adoption of this Standard, except in relation to items which have not
        been recognized as a result of transitional provisions under another
        International Public Sector Accounting Standard. The disclosure

                                         59                                   IPSAS 1
                      PRESENTATION OF FINANCIAL STATEMENTS


          provisions of this Standard would not be required to apply to such
          items until the transitional provision in the other International Public
          Sector Accounting Standard expires.

135.      Notwithstanding the existence of transitional provisions under another
          International Public Sector Accounting Standard, entities that are in the
          process of adopting the accrual basis of accounting for financial reporting
          purposes are encouraged to comply in full with the provisions of that other
          Standard as soon as possible.
Effective Date
136.      This International Public Sector Accounting Standard becomes
          effective for annual financial statements covering periods beginning on
          or after July 1, 2001. Earlier application is encouraged.

137.      When an entity adopts the accrual basis of accounting, as defined by
          International Public Sector Accounting Standards, for financial reporting
          purposes, subsequent to this effective date, this Standard applies to the
          entity’s annual financial statements covering periods beginning on or after
          the date of adoption.




IPSAS 1                                   60
                      PRESENTATION OF FINANCIAL STATEMENTS




                                                                                           PUBLIC SECTOR
                                                                        Appendix 1

Illustrative Financial Statement Structure
This appendix is illustrative only and does not form part of the standards. The
purpose of the appendix is to illustrate the application of the standards and to assist
in clarifying their meaning.

The Standard sets out the components of financial statements and minimum
requirements for disclosure on the face of the statement of financial position and the
statement of financial performance as well as for the presentation of changes in net
assets/equity. It also establishes further items that may be presented either on the
face of the relevant financial statement or in the notes.

The purpose of this appendix is to provide examples of the ways in which the
requirements for the presentation of the statement of financial performance,
statement of financial position and changes in net assets/equity might be presented in
the primary financial statements. The order of presentation and the descriptions used
for line items should be changed where necessary in order to achieve a fair
presentation in each entity’s particular circumstances. For example, line items of a
public sector entity such as a defense department are likely to be significantly
different from those for a central bank. The financial statements have been prepared
for a national government and the statement of financial performance (by function)
illustrates the functions of government classifications used in the Government
Finance Statistics. These functional classifications are unlikely to apply to all public
sector entities. Refer to this Standard for an example of more generic functional
classifications for other public sector entities.

Public Sector Entity-Statement of Accounting Policies (Extract)
Reporting entity
These financial statements are for a public sector entity (national government of
Country A). The financial statements encompass the reporting entity as specified in
the relevant legislation (Public Finance Act 20XX). This comprises:
•   Central government ministries; and
•   Government Business Enterprises.

Basis of preparation
The financial statements comply with International Public Sector Accounting
Standards for the accrual basis of accounting. The measurement base applied is
historical cost adjusted for revaluations of assets.

The financial statements have been prepared on a going concern basis and the
accounting policies have been applied consistently throughout the period.




                                           61                         IPSAS 1 APPENDIX
                             PRESENTATION OF FINANCIAL STATEMENTS


Public Sector Entity — Statement of Financial Position as of 31 December 20X2
(In Thousands of Currency Units)
                                            20X2       20X2         20X1   20X1
ASSETS
Current assets
Cash and cash equivalents                    X                       X
Receivables                                  X                       X
Inventories                                  X                       X
Prepayments                                  X                       X
Investments                                  X                       X
                                                        X                   X
Non-current assets
Receivables                                  X                       X
Investments                                  X                       X
Other financial assets                       X                       X
Infrastructure, plant and equipment          X                       X
Land and buildings                           X                       X
Intangible assets                            X                       X
Other non-financial assets                   X                       X
                                                        X                   X
Total assets                                            X                   X


LIABILITIES
Current liabilities
Payables                                     X                       X
Short-term borrowings                        X                       X
Current portion of borrowings                X                       X
Provisions                                   X                       X
Employee benefits                            X                       X
Superannuation                               X                       X
                                                        X                   X
Non-current liabilities
Payables                                     X                       X
Borrowings                                   X                       X
Provisions                                   X                       X
Employee benefits                            X                       X
Superannuation                               X                       X
                                                        X                   X
Total liabilities                                       X                   X


Net assets                                              X                   X



IPSAS 1 APPENDIX                              62
                          PRESENTATION OF FINANCIAL STATEMENTS




                                                                                    PUBLIC SECTOR
NET ASSETS/EQUITY
Capital contributed byother government    X                      X
entities
Reserves                                  X                      X
Accumulated surpluses/(deficits)          X                      X
                                                     X                     X
Minority interest                                    X                     X
Total net assets/equity                              X                     X




                                                                                                    PUBLIC



                                           63                    IPSAS 1 APPENDIX
                            PRESENTATION OF FINANCIAL STATEMENTS


Public Sector Entity—Statement of Financial Performance for the Year Ended
31 December 20X2 (Illustrating the Classification of Expenses by Function)

(In thousands of currency units)

                                                      20X2     20X1

Operating revenue

Taxes                                                  X           X

Fees, fines, penalties and licenses                    X           X

Revenue from exchange transactions                     X           X

Transfers from other government entities               X           X

Other operating revenue                                X           X

Total operating revenue                                X           X



Operating expenses

General public services                                X           X

Defense                                                X           X

Public order and safety                                X           X

Education                                              X           X

Health                                                 X           X

Social protection                                      X           X

Housing and community amenities                        X           X

Recreational, cultural and religion                    X           X

Economic Affairs                                       X           X

Environmental protection                               X           X

Total operating expenses                               X           X



Surplus/(deficit) from operating activities            X           X

Finance costs                                         (X)          (X)

Gains on sale of property, plant and equipment         X           X

Total non-operating revenue (expenses)                (X)          (X)



IPSAS 1 APPENDIX                                 64
                            PRESENTATION OF FINANCIAL STATEMENTS




                                                                                                       PUBLIC SECTOR
Surplus/(deficit) from ordinary activities                  X                  X

Minority interest share of surplus/(deficit)1              (X)                (X)



Net surplus/(deficit) before extraordinary items            X                  X

Extraordinary items                                        (X)                (X)

Net surplus/(deficit) for the period                        X                  X




1     The minority interest share of the surplus/(deficit) from ordinary activities includes the
      minority interest share of extraordinary items. The presentation of extraordinary items net of
      minority interest is permitted by paragraph 57(c) of International Public Sector Accounting
      Standard (IPSAS) 1, “Presentation of Financial Statements.” Disclosure of the minority
      interest share of extraordinary items is shown in the notes to the financial statements.

                                                   65                               IPSAS 1 APPENDIX
                            PRESENTATION OF FINANCIAL STATEMENTS


Public Sector Entity—Statement of Financial Performance for the Year Ended
31 December 20X2 (Illustrating the Classification of Expenses by Nature)

(In Thousands of Currency Units)
                                                         20X2                20X1
Operating revenue
Taxes                                                      X                   X
Fees, fines, penalties and licenses                        X                   X
Revenue from exchange transactions                         X                   X
Transfers from other government entities                   X                   X
Other operating revenue                                    X                   X
Total operating revenue                                    X                   X


Operating expenses
Wages, salaries and employee benefits                      X                   X
Grants and other transfer payments                         X                   X
Supplies and consumables used                              X                   X
Depreciation and amortization expense                      X                   X
Other operating expenses                                   X                   X
Total operating expenses                                   X                   X


Surplus/(deficit) from operating activities                X                   X
Finance costs                                             (X)                 (X)
Gains on sale of property, plant and equipment             X                   X


Total non-operating revenue (expenses)                    (X)                 (X)


Surplus/(deficit) from ordinary activities                 X                   X
                                               2
Minority interest share of surplus/(deficit)              (X)                 (X)


Net surplus/(deficit) before extraordinary items           X                   X
Extraordinary items                                       (X)                 (X)


Net surplus/(deficit) for the period                       X                   X




2     The minority interest share of the surplus/(deficit) from ordinary activities includes the
      minority interest share of extraordinary items. The presentation of extraordinary items net of
      minority interest is permitted by paragraph 57(c) of IPSAS 1, “Presentation of Financial
      Statements.” Disclosure of the minority interest share of extraordinary items is shown in the
      notes to the financial statements.

IPSAS 1 APPENDIX                                   66
                              PRESENTATION OF FINANCIAL STATEMENTS




                                                                                                PUBLIC SECTOR
 Public Sector Entity—Statement of Changes in Net Assets/Equity for the Year
 Ended 31 December 20X2

 (In Thousands of Currency Units)
                                Contributed   Revaluation   Translation   Accumulated   Total
                                  Capital      Reserve       Reserve       Surpluses/
                                                                           (Deficits)
Balance at 31 December
20X0                                X             X            (X)             X         X
Changes in accounting
policy                              (X)                                       (X)       (X)
Restated balance                    X             X             X              X         X


Surplus on revaluation of
property                                          X                                      X
Deficit on revaluation of
investments                                       (X)                                   (X)
Currency translation
differences                                                    (X)                      (X)


Net gains and losses not
recognized in the statement
of financial performance
                                                  X            (X)                       X
Net surplus for the period                                                     X         X
Balance at 31 December
20X1                                X             X            (X)             X         X
Deficit on revaluation of                         (X)                                   (X)
property
Surplus on revaluation of
investments                                       X                                      X
Currency translation
differences                                                    (X)                       X
Net gains and losses not
recognized in the statement
of financial performance                          (X)          (X)                      (X)
Net deficit for the period                                                    (X)       (X)
Balance at 31
December 20X2                       X             X            (X)             X         X




                                                67                          IPSAS 1 APPENDIX
                      PRESENTATION OF FINANCIAL STATEMENTS



                                                                          Appendix 2

Qualitative Characteristics of Financial Reporting
Paragraph 37 of this Standard requires the development of accounting policies to
ensure that the financial statements provide information that meets a number of
qualitative characteristics. This appendix summarizes the qualitative characteristics
of financial reporting.
Qualitative characteristics are the attributes that make the information provided in
financial statements useful to users. The four principal qualitative characteristics are
understandability, relevance, reliability and comparability.

Understandability
Information is understandable when users might reasonably be expected to
comprehend its meaning. For this purpose, users are assumed to have a reasonable
knowledge of the entity’s activities and the environment in which it operates, and to
be willing to study the information.
Information about complex matters should not be excluded from the financial
statements merely on the grounds that it may be too difficult for certain users to
understand.

Relevance
Information is relevant to users if it can be used to assist in evaluating past, present
or future events or in confirming, or correcting, past evaluations. In order to be
relevant, information must also be timely.
Materiality
The relevance of information is affected by its nature and materiality.
Information is material if its omission or misstatement could influence the decisions
of users or assessments made on the basis of the financial statements. Materiality
depends on the nature or size of the item or error judged in the particular
circumstances of its omission or misstatement. Thus, materiality provides a
threshold or cut-off point rather than being a primary qualitative characteristic which
information must have if it is to be useful.

Reliability
Reliable information is free from material error and bias, and can be depended on by
users to represent faithfully that which it purports to represent or could reasonably
be expected to represent.




IPSAS 1 APPENDIX                           68
                      PRESENTATION OF FINANCIAL STATEMENTS




                                                                                          PUBLIC SECTOR
Faithful Representation
For information to represent faithfully transactions and other events, it should be
presented in accordance with the substance of the transactions and other events, and
not merely their legal form.
Substance Over Form
If information is to represent faithfully the transactions and other events that it
purports to represent, it is necessary that they are accounted for and presented in
accordance with their substance and economic reality and not merely their legal
form. The substance of transactions or other events is not always consistent with
their legal form.
Neutrality
Information is neutral if it is free from bias. Financial statements are not neutral if
the information they contain has been selected or presented in a manner designed to
influence the making of a decision or judgment in order to achieve a predetermined
result or outcome.
Prudence
Prudence is the inclusion of a degree of caution in the exercise of the judgments
needed in making the estimates required under conditions of uncertainty, such that
assets or revenue are not overstated and liabilities or expenses are not understated.
However, the exercise of prudence does not allow, for example, the creation of
hidden reserves or excessive provisions, the deliberate understatement of assets or
revenue, or the deliberate overstatement of liabilities or expenses, because the
financial statements would not be neutral and, therefore, not have the quality of
reliability.
Completeness
The information in financial statements should be complete within the bounds of
materiality and cost.

Comparability
Information in financial statements is comparable when users are able to identify
similarities and differences between that information and information in other
reports.
Comparability applies to the:
•   Comparison of financial statements of different entities; and
•   Comparison of the financial statements of the same entity over periods of time.
An important implication of the characteristic of comparability is that users need to
be informed of the policies employed in the preparation of financial statements,
changes to those policies and the effects of those changes.
                                          69                         IPSAS 1 APPENDIX
                     PRESENTATION OF FINANCIAL STATEMENTS


Because users wish to compare the performance of an entity over time, it is
important that financial statements show corresponding information for preceding
periods.

Constraints on Relevant and Reliable Information
Timeliness
If there is an undue delay in the reporting of information it may lose its relevance.
To provide information on a timely basis it may often be necessary to report before
all aspects of a transaction are known, thus impairing reliability. Conversely, if
reporting is delayed until all aspects are known, the information may be highly
reliable but of little use to users who have had to make decisions in the interim. In
achieving a balance between relevance and reliability, the overriding consideration
is how best to satisfy the decision-making needs of users.
Balance Between Benefit and Cost
The balance between benefit and cost is a pervasive constraint. The benefits derived
from information should exceed the cost of providing it. The evaluation of benefits
and costs is, however, substantially a matter of judgment. Furthermore, the costs do
not always fall on those users who enjoy the benefits. Benefits may also be enjoyed
by users other than those for whom the information was prepared. For these reasons,
it is difficult to apply a benefit-cost test in any particular case. Nevertheless,
standard-setters, as well as those responsible for the preparation of financial
statements and users of financial statements, should be aware of this constraint.
Balance Between Qualitative Characteristics
In practice a balancing, or trade-off, between qualitative characteristics is often
necessary. Generally the aim is to achieve an appropriate balance among the
characteristics in order to meet the objectives of financial statements. The relative
importance of the characteristics in different cases is a matter of professional
judgment.




IPSAS 1 APPENDIX                         70
                 PRESENTATION OF FINANCIAL STATEMENTS




                                                                                  PUBLIC SECTOR
                       Comparison with IAS 1
International Public Sector Accounting Standard (IPSAS) 1, “Presentation of
Financial Statements,” is drawn primarily from International Accounting
Standard (IAS) 1, “Presentation of Financial Statements.” The main
differences between IPSAS 1 and IAS 1 are as follows:
•   Commentary additional to that in IAS 1 has been included in IPSAS 1
    to clarify the applicability of the standards to accounting by public
    sector entities for example, discussion on the application of the going
    concern concept has been expanded.
•   IAS 1 allows the presentation of either a statement showing all changes
    in net assets/equity, or a statement showing changes in net assets/equity
    other than those arising from capital transactions with owners and
    distributions to owners in their capacity as owners. IPSAS 1 requires the
    presentation of a statement showing all changes in net assets/equity.
•   IPSAS 1 uses different terminology, in certain instances, from IAS 1.
    The most significant examples are the use of the terms “entity,”
    “revenue,” “statement of financial performance,” “statement of financial
    position” and “net assets/equity” in IPSAS 1. The equivalent terms in
    IAS 1 are “enterprise,” “income,” “income statement,” “balance sheet”
    and “equity.”
•   The definition of the term “extraordinary item” differs from that used in
    IAS 8, “Net Profit or Loss for the Period, Fundamental Errors and
    Changes in Accounting Policies.” The definition includes an additional
    criterion, namely that the items be “outside the control or influence of
    the entity” (paragraph 6).
•   IPSAS 1 contains a different set of definitions of technical terms from
    IAS 1 (paragraph 6).
•   IPSAS 1 contains a transitional provision allowing the non-disclosure of
    items which have been excluded from the financial statements due to
    the application of a transitional provision in another IPSAS
    (paragraph 134).
IPSAS 1 contains a summary of qualitative characteristics (based on the
IASC framework) in Appendix 2.




                                     71                        IPSAS 1 APPENDIX

								
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